Highlights

  • Trustees will reportedly make the Division 296 cost-base reset on a standalone form, not on the SMSF annual return.
  • The signed form stays in the fund's records, not with the ATO, though auditors will likely request a copy.
  • Trustees can elect any time up to the 2026–27 return due date, so late lodgers keep their chance.
  • Division 296 applies from 1 July 2026 and adds tax on earnings linked to balances above $3 million.

Picture the cost-base reset as one more item inside the SMSF annual return, due when the return is due. Now picture something quite different: a standalone form, signed by trustees and filed away with the fund's own records, never travelling to the ATO at all. That second picture is the one a leading adviser painted for a national conference this month. The ATO has not yet released the form, but the shift matters. It gives late-lodging funds extra time and hands auditors a new document to chase.

What was said in Melbourne

Jemma Sanderson of Cooper Partners addressed The Tax Institute's National Superannuation Conference in Melbourne on 22 October 2026. "There is going to be a separate election form," she said, calling the split from the SMSF annual return (SAR) "a really good outcome".

The form is not lodged with the ATO. "It's for the records of the fund," Sanderson said, adding that "the auditor will no doubt be asking for a copy of it."

This is practitioner commentary on the ATO's expected approach, not a published ATO form or ruling. Details may change when the ATO releases the form.

What the reset is designed to do

Division 296 imposes extra tax on earnings attributable to large super balances. The ATO says it applies from 1 July 2026. Under the revised design, the tax bites on earnings linked to the part of a member's balance above $3 million, with a higher rate above $10 million.

The reset lets trustees adjust the cost base of fund assets to their value at 30 June 2026, keeping growth built up before the tax began out of future Division 296 earnings. Without it, a fund holding large unrealised gains at that date could see the earlier growth counted as earnings once the assets are sold.

Its worth depends on each fund's assets, values and member balances.

Why late lodgers gain time

Trustees need not act the moment the form appears. The election can be made "at any time from now until the [annual return] lodgement due date for the 2026/27 [income] year", Sanderson said.

Because it "can be made independently" of the return, a fund that lodges its SAR late does not forfeit the opportunity. The 2026–27 due date varies with whether the fund is new, whether it uses a registered tax agent and its lodgment history, so each trustee should confirm their own date.

A hypothetical worked example

Suppose an SMSF bought a commercial property in 2015 for $1.2 million. It is independently valued at $2 million at 30 June 2026, and the fund sells it in 2027–28 for $2.2 million.

With no reset, the capital gain is $1 million. With a reset to the 30 June 2026 value, the gain counted for Division 296 drops to $200,000, because $800,000 of earlier growth falls away.

Only the share of earnings tied to a member's balance above the thresholds attracts the extra tax, and the CGT discount and other adjustments may apply. These figures are simplified, and final rules and ATO guidance will set the method.

Paperwork worth preparing

SMSFs already value assets at market value each year, so the 30 June 2026 values carry extra weight now that a reset relies on them. Trustees considering the election may want to keep valuation evidence for each asset, especially property and unlisted investments, record their decision in minutes beside the signed form, and store both where the auditor can review them.